IRS Extends Transition Relief for Code Section 409A Deferred Compensation Arrangements Through 2007
On October 4, 2006, the Treasury Department released IRS Notice 2006-79, generally extending through the end of 2007 the previously issued transition relief under Section 409A of the Internal Revenue Code, with a notable exception in the case of certain discounted stock rights granted to “insiders” of publicly held companies. Notice 2006-79 also confirmed that while the IRS and Treasury intend to issue final regulations under Section 409A before the end of 2006, the final regulations will not become effective until January 1, 2008 and taxpayers may therefore continue to rely on the previously issued Notice 2005-1 and/or the existing proposed regulations under Section 409A until then. This memorandum addresses IRS Notice 2006-79 and its implications.